The productions of substandard products and subsequent recalls have had a profound impact on the automobile industry, especially for GM and Toyota. This took place after this industry was hard hit by the global recession. In the U.S., “America’s car and the light truck market dropped dramatically in 2008, to approximately 13.2 million units for the year, down by about 2.9 million from the number of units sold in 2007” Fernando (2010), In addition, the condition worsen further in 2009 which seen two motor manufacturing giants GM and Chrysler filing bankruptcy. This paper takes an in-depth analysis of the performance of GM, Toyota and Ford in the recent past and how recalls have impacted their sales. Towards this, two articles by Fernando (2010) and Tabuchi (2010) will be reviewed to analyze the statistical data on sales recorded by Toyota, GM and Ford in the recent past.
In 2007, Toyota with aggressive marketing and strong brand development, Toyota made a steady rise to be the top world’s largest auto seller. This rise of Toyota onto the throne had a mixed reaction in the auto industry. This lead to a wide variance of opinions concerning the steady rise of Toyota. Tabuchi (2010) according to, Whether it becomes the world’s number one automaker depends on annual worldwide vehicle production, rather than sales, and final bragging rights for that won’t be decided until production numbers are tallied for the whole year” This precipitated critical analysis of the economic situation and sales information of the three giants that is GM, Toyota and Ford.
According to Tabuchi (2010 “most analysts say Toyota is advancing precisely in those areas that General Motors Corp. has fallen behind, making it likely that Toyota will snatch from GM the title it has held for 76 years.” This is because Toyota Motor Corp. made record sales of 2.35 million vehicles worldwide in the January-March period leading to 2.26 million vehicles sold by GM in the first quarter year. This great development in sales made Toyota gain root in some of the other giant automakers’ markets. In addition, the continuous demand of Toyota brands made its global output rise to a record 10 percent which saw 9.018 vehicles toping GM with 162,000.In another closer analysis, in the year 2006 Toyota made a record 2.37 million vehicles worldwide on which GM made 2.34 million vehicles. In this regard, Toyota’s profitability increased to $11.8 billion while GM registered a loss of $2 billion.
Toyota Company increased their enormous investment in the devilment of fuel-efficient vehicles, such as Yaris, Corolla and gas-electric Prius all of which made great sales due to increasing gas prices. GM on the other hand reduced its production so as to reorganize itself for turnaround strategies. In this competition, Tabuchi (2010) “GM said although Toyota won the first quarter, the fight for global leadership is not over for the year. A company spokesman said, “it would not chase market share solely to recapture the lead from Toyota, and it has no special plan to retake the lead.”
The GM problem was further precipitated by a record 1.3 million recall which affected 2005-2010 Chevrolet, Cobalt, and 2005-2006 Pontiac Pursuit which traditional market in Canada. The 2005-2006Pontiac G4s is a renowned brand in Mexico. This recall was a great move to help maintain their reputation as well as put customer satisfaction ad complaints top of their priority. To carry out this intervention, GM had to reduce its investments in order to deal with the recall problem. In doing so, other big giants like Toyota took advantage and made their way to the top.
The year 2009 was drastically challenging with most companies registering losses.In this regard; Toyota reduced its sales targets for the 2009 by 700,000 vehicles. Their earlier set goal was 10.4 million vehicles. This resulted in a record of 2% in sales from 2008 sales of 9.5 million vehicles. The problem of recall has over the recent past negatively affected Toyota. This has resulted in the drop in sales by 8.7%.The company has moved very fast to apologize to the public to defend its reputation in the auto industry.
In analyzing the success of Toyota as compared to GM Fernando (2010) “Koji Endo, auto analyst with Credit Suisse in Tokyo, believes the trend of Toyota outdoing GM is very difficult to reverse and further explains that Toyota sales are booming because of its good image around the world about reliability and ecological technology, he said. It’s just the opposite for GM, and its image is deteriorating.”
In analyzing the performance of Ford, the introduction of 2.0L Ford Focus with the dual-clutch transmission technology, the company has seen an increase in sales. Fernando (2010) illustrates that “Ford Escape continues its robust performance through 2009 as well with sales for the first 8 months of the year up 26% from the same period last year, with customer demand often outstripping supply in that it posted a notable increase in June, with a 92% lift versus the same period last year. The Ford Escape now ranks third in the Small SUV Segment” Fernando (2010). Ford has seen an increase in sales taking into consideration that GM and Toyota are struggling to come up due to recalls
In conclusion, the two auto maker’s giants are struggling to regain their market shares as well as fight to restore the confidence of the public in their brands. The auto industry has been affected by defects in the vehicles whose cause is still under investigation. The recent recall problem of Ford has resulted in 43% rise while GM posted an 11.5 rise in their sales. These figures depict how auto industry is relatively fragile with customers switching very fast based on several underlying factors.
Fernando, V. (2010). Goldman: Ford And GM Clobbering Toyota And Set For Huge Growth. Business Insider. Web.
Tabuchi, H. (2010). Toyota Is to Recall 2010 Prius Model Cars for Brakes. Web.